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Ofcom's automatic compensation proposal

Posted by Anthony Karibian on Aug 31, 2017 2:32:50 PM

Earlier this year, telecoms regulator Ofcom proposed compensation for customers. Automatic refunds were proposed to be given to customers if their landline or broadband services are too slow, or if repair deadlines were rescheduled or missed.

Under this proposal, it was said customers would be entitled to automatic compensation, and not have to go through tedious claim processes. This proposal was put in place to encourage providers to give better customer service and the customers themselves would be properly compensated.

This meant that up to £182 million extra could be paid out as compensation annually.

The Internet Service Providers Association says suggested compensation levels are out of proportion. Andrew Glover, Chair of ISPA, has warned that this could, therefore, divert resources away from supplying faster connections throughout the UK.

Given that this is a relatively new proposal, it suggests that sufficient resources are going into supplying faster connections throughout the UK. I am struggling to grasp this point after the recent study showing UK broadband speeds trailing behind most of Europe. This study shows that our infrastructure is severely lacking, and it is a topic that I’ve been reading with keen interest and openly voice my opinions - see the link above.

I agree that something needs to be done about customer satisfaction with broadband services, however, this compensation could have an extremely negative effect on small Communication Providers (CPs) who provide internet services and have to rely on BT and Openreach’s slow service.

Currently, small CPs like bOnline must provide a high level of service at low prices to compete with big established CPs. Customers have far less leverage with the large established CPs such as BT, Plusnet or Vodafone which dominate their markets despite having some of the worst customer reviews. A customer would have limited or no leverage to demand compensation or fairer terms from such large CPs. Automatic compensation would be more effective in aligning the large CP’s behaviour with the interests of the customer, particularly, if the CP controls their infrastructure.

I can see small CPs getting disproportionately penalised by Automatic Compensation rules proposed by Ofcom. Just like bOnline, most do not own their broadband infrastructure and rely on Openreach to provide broadband services. From past experience, most broadband service problems affecting our small business customers are controlled by Openreach and to a lesser extent other large providers. Small CPs have little or no control over the cause, prevention or timely resolution of such problems. Therefore, it seems unrealistic that these small CPs should have to pay fines for these problems.

In addition, small CPs already have to subsidise a large proportion of on-going engineering charges such as delayed or missed appointments from Openreach engineers, or other instances when customers refuse to pay. At bOnline, and I’m sure many small CPs, we are often unable to recover such charges from our customers or from Openreach. As you can imagine, this is already a huge cost that small CPs have to subsidise. We believe that adding a punitive £10 per day Automatic Compensation penalty will risk putting most small CPs out of business and reduce the level of competition in the market.

I FULLY agree with Ofcom’s proposal, BT and Openreach should budget for the appropriate works to be carried out to improve services for customers. It has been their neglect and lack of investment into the infrastructure that’s landed the UK in this situation. It is a completely separate issue to compensating customers. I think that there should be a way of protecting small companies who provide internet, ensuring and fines reach the correct companies, not those merely renting line space off the large service providers.

It all comes down to, in my opinion, getting the right infrastructure in place for phone and broadband. As the UK is suffering from slow download speeds, customers have every right to complain. Getting the infrastructure to a state where speeds are acceptable, and fibre is offered to all areas of the UK is the number one priority. The current industry norm of long drawn out compensation processes does not work and unnecessarily burdens small businesses.

BT has recently offered to spend up to £600 million to bring broadband to the remaining rural areas of the UK, stating that 99 per cent will be connected by 2020. This is obviously fantastic news and would benefit everyone, suppliers, customers and UK businesses.

I stand firmly with the members of the Citizens Advice, who urge Ofcom to stand its ground and introduce a mandatory automatic compensation scheme for broadband customers, but the next discussion they need to have is for which ISPs, and who gets fined.

I have previously written to Ofcom on this topic, and will suggest the same things again which I hope they will take into consideration:

  • Allow ISPs and CPs to automatically pass through all compensation costs directly to Openreach or the Wholesale CP that controls the broadband infrastructure and maintenance network (i.e. Engineers). This would ensure that the penalty is applied to the party responsible for causing and fixing the broadband service issues.
  • Establish strict guidelines for Openreach engineering visits and other broadband-related maintenance and enforce minimum Service Level Agreements (SLAs) with automatic penalties to ensure that Openreach provides all CPs with a consistent and high level of service, as well as, accurate and timely information to CPs so they can better manage the customer experience.
  • Give small business customers the right to early termination of contracts at no cost so that they can restore broadband service with an alternative provider. If broadband is a lifeline to a small business, then it is unlikely that a £10 compensation payment per day will offset the cost of not having Internet access.

Topics: Broadband, CEO's blog

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